Artificial intelligence (AI), a sub-industry of the technology industry, has been a major force in propelling the US equity market over the last few years. The strong growth of the AI industry has propelled many companies to higher levels, and NVIDIA’s market capitalization jumped to more than $3 trillion.
There are recent signs, though, that the AI bubble will burst, and this could affect the best performers. The article below highlights which AI stocks you should sell in order to prevent long-term loss.
AI Stocks to Sell Now to Avoid Losses
Fear and greed are the two main motivators of investors. These investors are more likely to flock sectors that show promise. The theme in the late 90s was successful dot-com businesses. The dot-com bubble burst in the early 2000s, and this theme ended.
Investors anticipated a boom in the cannabis industry after US legalization. These stocks are all in a slump, and the MSOS ETF, which tracks the largest American cannabis companies, has fallen by 94% since its high.
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Electric vehicles are another industry that has boomed, as companies have tried to mimic Tesla’s success. The majority of EV shares like Rivian, Lucid and Canoo have collapsed. Companies such as Fisker and Canoo have also filed for bankruptcy.
The Wyckoff Theory can be used to explain this view. It identifies four phases in which stocks move. The first phase is the accumulation, then comes the marking up where the stocks rise as FOMO intensifies. Then they go through distribution and markup.
Palantir Technologies, SoundHound AI and CrowdStrike are some of the best AI stocks that you should sell in order to prevent huge losses.
Palantir Technologies (PLTR)
Palantir Technologies, one of the best AI stocks you can sell in order to prevent long-term losses. Since our last warning on the company, it has fallen by more than 30%.
Palantir’s main problem is the valuation, especially since its recent market cap surged up to $230 billion. Palantir’s market cap has dropped to around $200 billion, but it remains overvalued.
Palantir Technology is experiencing a boom in its business, but the forward PE of 147 it has is higher than average for S&P 500 of 22. This is much higher than the other index companies that are performing well.
Analysts expect revenue to grow 37% this quarter and by 32% next year. Despite this growth, this price is still hard to justify. The stock may also be moving into the Wyckoff Theory’s distribution phase.
CrowdStrike, CRWD
It is one of top AI stocks that you should sell now before they drop further. The stock has fallen by more than 27% since its peak this year and hovers at its lowest point since November.
CrowdStrike is having a good year. Its revenue grew by 25 percent to $1.06 Billion in the fourth-quarter. The annual rate of recurring revenue increased by 23%, to $4.24 Billion. Analysts predict that revenue growth will be 21% in this year, and 21.85% by 2026. Its valuation remains high, however, as its forward PE ratio is 97. This is much higher than S&P’s average 21.
You can read more about why CrowdStrike’s lower guidance may be a good buying signal
SoundHound AI (SOUN)
SoundHound, another AI-related stock that is worth selling, has fallen by more than 60% since its high. Its latest results show that its business is still performing well, as revenue grew by 101% from $34.5 to $43.5 million.
The revenue increase brought the annual total to more than $84,000,000. Analysts predict that revenue for this company will increase by 96% to $166 millions, and then $215 million the following year.
It is important to determine if the business can maintain its profitability in the face of increasing competition.
Updates may change the content of this post: The AI bubble has burst. Top AI stocks to buy to prevent long-term loss
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